German bonds experienced a rise following data indicating that inflation in France and Spain is decelerating at a faster rate than anticipated. This has led currency markets to increase their bets on the European Central Bank (ECB) cutting interest rates again in October.
Germany's two-year bond yield dropped by 7 basis points to 2.06%, reaching its lowest point since December 2022. The market is now estimating an 80% chance of a 25 basis points rate cut in October, up from 20% just a week ago.
British bonds also saw a slight increase, with traders boosting their expectations for rate cuts next year. By September of next year, the market predicts a 146 basis points cut, which is 6 basis points higher than the forecast made on Thursday.
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